The Money on the Left Editorial Collective presents a classic episode from our archives along with a previously unavailable transcript & graphic art. In this episode, we’re joined by Rohan Grey (@rohangrey), President of the Modern Money Network, Director of the National Jobs for All Coalition, Research Fellow at the Global Institute for Sustainable Prosperity, and JSD student at Cornell Law school.
Our conversation is dedicated to Rohan’s current work on the political, economic, and cultural implications of money’s digital future.
Rohan’s report on digital fiat money: “The Case for Digital Legal Tender: The Macroeconomic Policy Implications of Digital Fiat Currency.”
Theme music by Hillbilly Motobike.
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Transcript
The following was transcribed by Richard Farrell and has been lightly edited for clarity.
Maxximilian Seijo: Alright, so Rohan, you’ve always got multiple irons in the fire, but today we’ve invited you to speak with us about digital money, and specifically why it matters for the left. To get the ball rolling, can you sketch a picture of the current state of digital money for our listeners? What types of technologies are out there? Who are the major players in this world? What kinds of arguments are they making about the future? And what is politically, economically or even culturally at stake? In other words, why should the future of digital money be a central concern for leftist praxis?
Rohan Grey: Yeah, sure. The first thing to note is that there have been proposals for digital private money going back decades. I think David Chaum in the early 1980s was arguably one of the first to put together a technical proposal. There was a burst of energy around the idea in the early 1990s when the internet was first becoming big in a mainstream sense. It fizzled out for various reasons, some technical, some political, and some just based on decisions people made. It was revitalized after the 2008 crisis, in part, because of the crisis, and in part, because of a white paper by a pseudonymous author named Satoshi Nakamoto, who wrote a paper about this blockchain technology that was supposed to solve a technical issue in cryptography, called the “Byzantine Generals Problem” about how to maintain a consensus between non-trusting entities around a common ledger, or a common set of data. That paper led to Bitcoin and a surge of interest from technologists, investors, bankers, anarchists, and members of the public and media.
So you had this software revolution. At the same time, you had this hardware revolution in the global south, in places like Kenya, because of the rise of cell phones, where suddenly you didn’t need a single bank or banking system to process all the transactions in the community. You could have every person essentially communicate with each other over the cellphone network and their phones would do the job of managing ledgers and processing. So if you had distributed mobile phone technology in the 1700s, perhaps you wouldn’t have seen the rise of private banks at all to do that kind of centralized or intermediary transaction processing. But because a lot of those countries in the global south didn’t have a particularly developed banking system, these mobile money technologies were able to fill the gap to an extent. So you had a hardware and software revolution going on in different places. And people started to take seriously the idea that digital money’s time has come.
A lot of people, of course, were just driven by profit motives and dollar signs in their eyes. Unfortunately, the capitalist movers are often the quickest off the bat when it comes to new technology. But if you think of the existing monetary and financial banking landscape as being shaped, in part, by the material structure and limits of the money technology itself–coins in one era, paper money in another era, and different forms of legal accounting, like double entry accounting and things–these technologies of money and finance shape the economic structure of the economy. And if you think about the way that digital technology worked, or communications technology, before we had the internet–we had phones, fax machines, paper pages, Morse code, cell phones, desktops, etc–now, you have this one general purpose computer in your pocket connected to a general purpose data network. All of these various functions are being done through this single, common general infrastructure. You can think of this moment in history as a moment where powers and different seemingly distinct monetary and financial processes are collapsing into mere variations of a single digital thing. That’s a pretty transformational moment in terms of technology of money.
Unfortunately, a lot of people working in this space have a poor understanding of money as a social, political, and legal phenomenon beyond the technical aspects of transactions and payments. They studied orthodox economics, Austrian economics, or are libertarians. As a result, a lot of their energy and attention has been misplaced. It’s that saying, “If you don’t know where you’re going, you’ll probably end up somewhere else.” So they thought that the theory of money was easy and it was just the theory of technology that was hard. Whereas, in reality, both are hard and you need to understand both. So you had technologists and cryptologists, who’d think of it as a technical problem, you had anarchists, who saw the importance of digital money as a way of preventing the surveillance and totalitarian control that the internet has a potential for. So if you think about governments shutting down banks or other things in Egypt, or Iran, or cutting off donations to WikiLeaks and things, eventually, governments and regulators stepped in. First of all, it was just about how you regulate this private activity, or how you allow private innovation, blah, blah, blah, how you set up regulatory sandboxes so people can experiment. But over time, and particularly in the last couple of years, there’s been a rise of a growing appreciation amongst policymakers and central bankers that public digital currency is as necessary as merely private ones.
It went from “This is a nice idea that’ll never happen,” going back to James Tobin and things decades ago, to, “Well, this might happen in the future but it’s a long way off,” to, “This is happening right now, what are we going to do about it?” The reason why it is relevant for leftists, to a big degree, is that, at the moment, this conversation is dominated by technocrats, by capitalists, by technologists who don’t necessarily have the best leftist politics, even if they consider themselves progressive. At the central banking level, these are people with degrees in macroeconomics or modeling statistics and math who are making pronouncements about the future of economic privacy and civil liberties. They’re not consulting the ACLU and they’re not consulting the public. They’re just making these decisions as a footnote in a paper that’s otherwise full of mathematical models. And so, you have debates over private currencies, private databases, private transactional platforms–that’s your Bitcoin blockchain world. You have debates over anonymous, censorship resistant, or central node resistant technology–that’s your crypto community. And then, you have people looking at things like central bank digital cash, central bank cryptocurrency, and things like that. That’s where my interest is mostly.
Because, I think that’s where you really need to be thinking about the politics of this in terms of global public policy implications. A lot of that conversation is over giving people the equivalent of a public bank account–an account at the central bank, a postal bank, or something like that of a public bank. I’m more interested in trying to create the digital equivalent of cash, because I think it’s important to be able to have transactions that can go ahead even without the pre-approval of some central regulator. Once the cash is in existence, like notes in your pocket, you and I can transact with those notes and the paper notes themselves are not going to call the police. The police can monitor your activity if they have a search warrant or something, or even if they don’t, but it’s not like the money itself is spying on you and reporting you to the cops. I think it’s important to have that kind of technology. I was actually at a conference at the St. Louis Fed a few weeks ago on cryptocurrencies and blockchain. I talked to a well respected economist there who wrote a paper on privacy, anonymity, and money, and he was talking about it in the context of avoiding scam marketers who follow you around after a purchase if they could see you making that purchase.
I said to him, “Surely, the whole totalitarian, fascist threat is a bigger issue.” And he said, “Well, yes, but that’s too big an issue for economists, because someone can always just make a big argument on the other side. So you have to find something small that people can grasp and start from there.” I found this to be both illuminating and depressing. So to go to the question about the stakes of the debate, or the contour lines of the debate, I think there’s a question of how much of this new technology or infrastructure is going to be perceived as a public good, or as a private market good. And within the private space, how much is going to be perceived as the domain of banking and finance–banking technology versus a financial extension of IT. So it’s about whether this is going to be Goldman Sachs and Citibank or it’s going to be Apple and Google. And then, within the public side, there’s a debate about whether this is exclusively just a technical upgrade to existing central banking operations, or whether it’s part of a broader digitalization of government finances in the vein of Estonia’s e-governance model. In terms of the technical, as I mentioned a second ago, there’s a debate over having accounts with an intermediary versus having what’s legally called a bearer instrument, where you own a digital wallet and any of the files in that wallet belong to you as a bearer.
And then, of course, from a leftist point of view, there’s the global, geopolitical and imperial considerations of these technologies. So you’re seeing Russia developing a CryptoRuble, Venezuela developing Petro that’s tied to the oil reserves in the country, the European Union talking about the need for a new global payment settlement system independent of the US dominated SWIFT system, because the US is using that control over the payment system to strong arm other countries into supporting its sanctions on Iran. In terms of why leftists should care, in addition to just the political stakes here, I think, firstly, we should never let a crisis go to waste. Digital technology is uprooting existing ways of doing things, which is creating new forms of instability. It’s changing power relations between different actors, empowering new kinds of workers, and new models of organizing. Things that were solid are melting into air, things that are fixed and frozen aren’t so much anymore. At the same time, there are new fracture lines emerging within private capital. Different actors are scrambling for dominance or beating each other to see who’s going to be at the top of the new mode of monetary technological production. And we can exploit those fracture lines, I think, to an extent.
Of course, all this is happening against the backdrop of the collapse and reorganization of global finance in the wake of 2008. If you think about the political moment in 1945, or the political moment in 1971, and the way that those decisions about the shape of international finance shaped global political economic dynamics for decades after, I think we’re in a moment like that. The last point on this is a more abstract idea, but I think of this as like the digitalization of certain kinds of analog politics. And what I mean about that is, if you think about the way that sound production works, there’s a difference between analog and digital sound recordings. Analog recordings record a smooth curve of different frequencies, whereas digital recordings have a series of slices of zeros and ones. Now, if you have it at a small enough scale, or a big enough scale, those digital sounds can sound very good and you can make extremely complicated shapes out of them. But, at the core of that technology, you’re moving from a smooth gradient to a zero or one binary. I think of that in terms of certain political questions today. It’s the kind of classic historical tension between freedom and privacy, on one hand, and some security and control, on the other.
For a lot of history, when it comes to money, there’s been an unsteady compromise where physical cash can be used to facilitate crime, tax avoidance, child pornography, rings, terrorism, etc. But on the other hand, it allows people to engage in transactions without needing the approval of their local banker or government, etc. And that’s been politically valuable. The way that we’ve maintained law and order in those situations is we put legal restrictions on top of the mining technology so it had search warrants, we put tracking devices on wads of cash, we try to monitor serial numbers when they come back to banks and put limits on undeclared interstate transportation of cash. At the same time, there were physical limits on cash itself. There’s only so many briefcases that you can carry, there’s only so many slabs of newly printed notes you can put in a plane hangar. There’s only certain things you can buy with cash versus other forms of money today. But now you can fast forward to a world where your digital wallet can hold a trillion dollars just as easily as it can hold ten dollars, and where all transactions don’t distinguish between cash, debit card, wire transfer, etc.
At the same time, it’s a world where any security compromise, any backdoor into that wallet of yours, means a total security compromise. The minute the NSA and all get to see everything, suddenly, all of those tensions, all of those 50% compromises, don’t really work so well. And you’re forced into a sharper dichotomy. Do we let private transactions exist and risk the permanent shift in favor of privacy against security and control? Or do we eliminate that entirely and have a world where all transactions are under the eye of the panopticon? Do we think the NSA and the Chinese Communist Party surveillance is a bigger risk than kiddie porn networks and the Taliban? To me, this is a socialism or barbarism moment, technologically speaking. And it’s an important moment that shouldn’t be decided without some leftist intervention.
Scott Ferguson: Thinking broadly, systemically, and politically, how would you say that your specifically legal MMT intervention really challenges the arguments and paradigms that are out there? What are you doing that’s challenging the field of digital money as it is? And more importantly, what kinds of collective transformations do you think this makes imaginable?
Rohan Grey: Yeah, so let me just give a little bit of background as to what I’m actually doing. I started off writing a research paper on mobile money that then put me in touch with some people at the USAID’s mobile money team. They put me in touch with a group of people who are working on a form of central bank digital cash technology, who are also quite involved with the United Nations telecom regulator agency called the ITU, the International Telecommunications Union. They read my white paper and when we met, they said, “Look, we’ve got the technology that we think works to do what you’re talking about,” which is, essentially, digital government cash. And once you have cash, you can create accounts on top. If you imagine a bank with a safety deposit box, you can put cash in the safety deposit box. And as long as that bank can be given permission to take cash out of your safety deposit box and put it into someone else’s, then even though the technology is cash, you can create the equivalent of accounts. So the cash technology is the fundamental layer as far as I see it. The bearer instrument technology, I should say.
So they said to me, ‘We’ve got the technology. We’ve done successful trials, but when we go to speak to central bankers, ironically, they get the technology but they’re concerned about the economic implications.” So they asked me to write a white paper for them on the economic implications, or macroeconomic implications, of digital fiat currency. From there, I got involved with the International Telecommunications Union. Now, I’m helping draft their regulatory standards for central bank digital currency, or government digital currency, around the world. The way law is important here is, first of all, I see a lot of MMT analysis as essentially, or implicitly, legally informed, which is one of the reasons why I was so drawn to it. Understanding money as a creature of public authority, and as something that manifests in legal design, as people like Christine Desan who you’ve had on this podcast earlier talked about, is important. So thinking about things legally is a good way of getting to the relevant technical layer of the system. Second of all, it allows you to cut through a lot of the theoretical bullshit that you’ve seen in economics.
Point to me the statute, point to me the accounting provisions, point to me the banking charter and the legal rules that limit what that bank can do, etc. It’s about being able to frame things in a language that isn’t just a subjective, economic language, but a language of law that still has ideological content to it and still has the potential for political disagreement. It’s a different kind of fight than if these conversations are taking place purely in the language of economics. You’ve got heterodox schools of thought and the orthodox schools. They can barely speak to each other. Whereas, when you go to law school, even if you have people who are extremely different politically, they can still walk into the same courtroom and engage in the same legal processes. And that kind of common language that’s tied directly to the empirical reality of how these institutions are working is valuable.
The other part of it is that legal structures can be designed in different ways to achieve similar outcomes. There’s a great historian of the common law–I forget his name–but he sort of said that the history of common law is that, if one idea doesn’t give you the outcome you want, then you just use another one. So if contract law doesn’t give you the outcome you want, then you use property law, tort law, or something else. And you can create the same phenomenon of say, a contract through the language of property with a slightly different window dressing. And so, by being able to separate the form from the substance, but also understanding how important the form is to the substance, it allows you to be pretty creative with the way that you design things, and the way that you redesign things to illuminate different aspects of the system, or to open up new possibilities and things.
So we’re going to do more work on that. I’m interested in helping social movements and things have their ideas being sufficiently granular and legally robust, even as I work on the inside with these policymakers and things. But ultimately, even when I was at the ITU conference that we helped organize at Cornell Tech a few months ago, one of the central bankers from Brazil, who is sort of the head of the Bank for International Settlements group that works on digital money–the Committee for Market Payment and Infrastructure (CPMI)–said, “Well, I’ve been working on developing a taxonomy of digital fiat currency, but I’m not a lawyer. It’s really great that we finally have a lawyer here who can help with this stuff.” Because, ultimately, this is going to be written into law. It’s gonna be written into policy documents and things. So at the end of the day, the lawyers are going to be called in eventually. We might as well get there pretty quickly.
William Saas: So your project, as we understand it, is to design a digital fiat currency system that radically restructures finance around public and environmental interests and severely contrasts, or in Keynes’s words, euthanizes the private rentier banking system. But before we get too deep into those weeds, would you mind giving our listeners a brief introduction to the present structure and perverse workings of the private, for-profit banking system?
Rohan Grey: Yeah, I mean, how much time do you have? My advisors at Cornell, where I’m doing my legal PhD at the moment, Robert Hockett and Saule Omarova, have written a very good piece that goes into this in a fair bit of detail called, “The Finance Franchise.” Essentially, their argument is that the commercial banking system, with all of these chartered banks, when they make loans, they don’t just take the money of people who’ve deposited money at that bank and lend that money out. You give me $100, I lend $50 to Billy, blah, blah, blah. Actually, what happens is they extend credit, and they get support from the central bank, which in turn is backed by the rest of the government. And in doing so, they’re creating new purchasing power and new forms of bank deposits that function with money and properties. So in that sense, they’re essentially engaging in fiscal activity. They’re extending the full faith and credit of the government to new forms of investment, new forms of spending, in ways that are, in theory, in accordance with a kind of public purpose, or a public-private partnership model. And you have a whole range of macroprudential regulations and microprudential regulations about the kinds of loans that banks should be able to issue and the purposes for those loans, etc.
Of course, once you go beyond the commercial banking layer, you also have the kind of broader shadow banking, or shadow money system, which, in part, relies on the commercial banking system, and, in part, relies on the ability to use collateral, including government Treasury securities or other forms of safe collateral, and turn that collateral into money through legal contractual arrangements called repurchase agreements with either dealers or the central bank. My friend, Daniella Gabor, has written a lot on the way that this creates this whole shadow money system underneath the regular public money and franchised commercial banking system. So both of those layers are what I would call franchise money, which is explicitly channeling the full faith and credit of the government, and these forms of shadow money, which are trying to give the impression through various forms of legal technology and business arrangements that they are as safe as, or somehow connected to or backed by, public money. You essentially have a world where, as Hyman Minsky said, “Anyone can create money, the challenge is to get it accepted.” And various forms of financial institutions have worked out various ways of getting their money, or their liabilities, accepted as money more broadly.
The last way I think it’s useful to think about the existing banking system is that, in many ways, it serves a social function as a payment system, both at the retail level–you and I do most of our transactions through a bank account, not through cash or not through any other financial platform–and also, at the wholesale level, where you have these large institutional investors with hundreds of billions of dollars in a pension fund, a hedge fund, or something, storing their money in very, very liquid forms of financial assets, like Treasury securities or money market fund shares that are supposed to function similar to a bank account. One of the reasons why they don’t just use bank accounts is because of the legal limits on deposit insurance. So I have a friend who was in the Treasury department at Goldman Sachs, the people responsible for keeping the cash flow alive at Goldman Sachs. And I said to him, “Most of the time you’re keeping your ‘cash’ in three month Treasury securities, or T-bills, right?” He said, “Yeah, of course. That’s what the money markets do. We keep our money in T-bills. When we talk about cash, we talk about T-bills.” And I said, “And you can’t keep it in a bank account, because you have limits on how safe that money is above a $250,000 cap. He said yes. I said, “If you didn’t have a cap, if there was unlimited deposit insurance, would you need to be doing all this stuff with T-bills?” He said, “No, we would just keep it all in a bank account.”
So the entire structure of the payment system is also a function of the way that we set up these rules for the banking system and money. To use that Minsky line again, “Anyone can create money, the challenge is to get it accepted,” if money is a credit instrument, then anyone that will accept a credit instrument of someone else as acceptable payment is engaging in a monetary activity. So you need to think of the payments infrastructure and the payments ecology as intrinsically connected to the monetary system, which means intrinsically connected to public finance, but also intrinsically connected to banking.
William Saas: So then, how can a new digital fiat currency transform money creation, finance, banking, and so on?
Rohan Grey: Yeah, so the first thing is I don’t think that the technology itself necessarily changes the underlying political potential to transform money creation, finance, etc. It was always there. What it does is change the balance of power and change the viability of certain strategies. So firstly, I think it simplifies and clarifies the way that the public financial and banking systems work. Just to give an example about that, right now, we finance government deficits by issuing Treasury securities, usually into a private market, or places like Canada have had the central bank buy that directly in the past. The private actors buy up these Treasury securities with money that central banks have injected into the banking system. And then, once those securities are held by those private actors, the central bank then intervenes, again, to buy up as many of those Treasury securities as it feels necessary to make sure that the overall supply of liquid reserves, or settlement balances, stays roughly the way it was before the whole process began. So even though what looks like governments are “borrowing” from private actors or private actors are “buying” government debt, really what’s happening is the central bank is monetizing or funding the government deficit indirectly through those private bond auction participants. As long as those bond auction participants know that they could turn around and sell those Treasury securities directly to the central bank the next day, or four to five minutes later for a profit, they’re always going to stand in the middle of that trade, because they get a free profit.
So the creation of digital fiat currency allows us to revisit a conversation of why do we do it like that. Why don’t we just allow central governments to issue a currency, a digital version of a platinum coin or something, and finance the deficit directly like that. And if we want to create some other kind of instrument that functions the way that a Treasury security does in the financial markets for collateral purposes or anything else, we can do that as well. But we don’t have to keep the system the way it is right now. And we can be more clear about what these processes are actually doing today, even if they might have done something very different at the time that they were first instigated. So, of course, if you’re under a gold standard or a fixed exchange rate regime, then Treasury debt does serve a very different function to cash itself. Treasury debt is a claim on cash, which is backed by gold, but Treasury debt itself isn’t backed by gold. Whereas today, in the modern time, that distinction is largely non-existence. In addition to making the system more simple and more clear, it can also make explicit the underlying political claims or dynamics at play.
So as I was talking about before, as my advisors Bob and Saule talk about, if you think of banks as franchised entities of the sovereign, then every time a bank extends its own liabilities, creates new bank deposits when they make a loan, what the Bank of England calls “fountain pen money,” because the minute you approve a loan with your pen, the money comes into existence, there’s no reason for that instrument to look and function differently than the government money that’s been created. There’s no reason to have bank deposits and government money be two different kinds of instruments when bank deposits are backed by the government anyway. It’s sort of like, why have a private army wear its own uniform when it’s serving the sovereign, rather than just putting them in the same uniform that everyone else is wearing and be very clear about the fact that these actors are engaging under public authority. It’s useful if you want to give the impression that black water activities are not the government’s activities so that you can distance yourself from them optically, but my argument, I think, is that that’s not actually very useful for public policymaking or for the way that the public understands these systems.
The other thing is it allows you to go back to the very foundation of these structures. I was a classical musician before I went to law school, and if you’re studying to be a world level pianist or something and you go to a new, top level teacher after being a prodigy in a small town or something, often what happens in those situations is they break your technique down to its most basic elements and rebuild you. At that time, it feels very disruptive and violent. You sort of feel like you’re an infant again for a while. But the reason they do that is because you may have learned some bad technique along the way that needs to be excised before you can build the strongest foundation possible, which usually the world class teachers have. And so, when we have an existing financial system that in many ways is the product of generations of historical sediment–legal, political, and technical–what new forms of disruptive technology allow us to do is to break all of that down and rebuild it again without the weight of that history being the dominant, guiding light. The last thing that it can do, and this is actually, I would say, something slightly, technically new, so maybe I’m going against what I said earlier, is that it can separate out different functions that, until now, for some technical reasons, were very hard to separate out.
So if you imagine the 1860s, you have a bunch of national banks around the US–very limited digital technology at that point–and all of these banks are doing various forms of payment processing. Now, even if these national banks are extending the full faith and credit of the government, because their banknotes are backed by government securities or something, it would still be a lot more difficult for each of those banks to call up the mint in Washington DC and get them to send out coins or government paper notes every time they make a new loan. In that context, unless you wanted to deputize every single bank to be its own mint, it would be technically difficult to collapse the banking payments layer with the public payments layer. First, just because it’s physically a long way away. And that is something that digital technology has the potential to allow us to revisit.
Actually, if you go to the common law of bank deposits, it goes back to the 13 or 1400s. Benjamin Geva has got a great chapter in Money in the Western Legal Tradition by Wolfgang Ernst and David Fox on this topic. The law of deposits emerged because of the technical challenges with carrying large bags of gold on behalf of account holders, essentially. These gold money changers, or goldsmiths, would have different people’s bags of gold that they would take in a horse and cart or something. It was very difficult to keep track of them all. It was a lot easier, technically, at that point to have a general claim against the goldsmith, or the money transmitter, and then to let them pull all of those various funds into a single pot and carry that pot around. If you did really care about your money, if it was sentimentally valuable or was a certain kind of Spanish doubloon or something you wanted to keep, you would seal the bag. The sealed bags would be kept separate from the general funds that were being transported. And that was actually a point of divergence in the law. On one hand, the common funds became the law of deposits. Anyone that gave money to that money transmitter had a general contractual claim against them. If you had a sealed bag, you owned the stuff in the sealed bag. That was the law of bailment, or the law of debt.
Today, the law of bailment or debt plays a very small role in most financial intermediation. It’s primarily a law of deposits. But with the form of digital cash technology, you could have an intermediary, as I was saying before, essentially managing your wallet for you, or managing a safety deposit box equivalent for you, and it would be possible to resume or return to that other legal tradition of bailment where the individual retains ownership over the phones even as there was an intermediary managing their wallet. That allows us to separate out the payments processing aspects of banking from the credit creation, or credit extension, aspects. And it’s not that it couldn’t have been done beforehand in an analog world, but it becomes exponentially easier and more viable with the technology we have and are developing today.
Maximilian Seijo: To those ends, it’s interesting, we neochartalists typically insist upon money’s fundamentally centralized and public character in order to put pressure on hegemonic views that see money as a form of decentralized exchange. But importantly, and what you’ve been alluding to with your last comments, you stress that monetary design should always provision certain forms of relatively decentralized, or even private, money use. Can you explain why this is politically and socially important, and how it might work in terms of the digital technology that you’re describing?
Rohan Grey: Yeah, sure. I just want to start with a caveat or note here. One reason this is a challenging topic, or that it sounds a bit counterintuitive from a left point of view that I do talk about these things, is because a lot of leftists, myself included, are not necessarily naturally technologically adept, or technologically inclined. We criticize surveillance state politics and organise anti-corporate campaigns from platforms on Twitter, Facebook, and Gmail not because we necessarily think that’s good praxis, but because the technological hurdle of switching to other more free, or politically consistent forms of technology that align with our values, is difficult, unless you’re a coder or programmer. So we’ve been predisposed to downplay the risks and scope of technological politics. I think this is the way that Boots Riley talked about his recent movie, Sorry to Bother You. When you feel paralyzed by the inability to act, it’s easier just to pretend the problem isn’t as bad as it is and to learn to accept the problem is inevitable. And for a while, I was one of those people. If I’m not doing anything wrong, why do I care? Surely, the best that we can do is to just trust in this thing, these government systems, to do the best job for us. If everything’s gonna go to hell in a handbasket, there’s nothing I can do about it. There’s nothing any of us can do about it other than just try as hard as we can.
But a law professor of mine at Columbia, Eben Moglen, who is a longtime technology and privacy advocate, said something that stuck with me. He said, “Privacy isn’t an individual or private thing. It’s a public, ecological issue. It doesn’t matter if you don’t give your social security number out to anybody. If they have every other person who was born in Boston that year, you’re just the other person left. You’re the other guy. So every time you send an email via Gmail, you’re not only placing yourself under surveillance, you’re placing everyone you send that email to under surveillance. So you can’t really leave privacy to a matter of individual, neoliberal politics of the self. It really needs to be considered a social and public phenomenon.” Two other things stuck with me. One was that the way historically–he’s a legal historian, by the way–totalitarian regimes and empires have typically fallen, is that the empire or the regime over exerts itself, either materially, in its attempts to control the populace, or more ideologically, in that eventually the people on the wall, they refuse to shoot the protesters or the people going over the wall.
But in a world of perfect technological surveillance, and of data mined dreams where the government knows you’re a political risk before you might know you’re going to be a political risk because of the way that you were browsing certain websites, or the way that your learning profile at the age of five matches the learning profile of other radicals or something, the cost of total surveillance and control drops dramatically. And then, when you have drones who won’t hesitate to shoot anyone who comes over the wall–they don’t have a conscience–suddenly, the biological or social circuit breakers against persistent totalitarianism don’t work as well anymore. So the last thing he said to me–it really got me, his family were Holocaust survivors–he said, “Next time they come for my family of Jews in Eastern Europe, they’re going to get every single one. Because they’ve got a list now of everybody. Everybody knows where they are at all times because they’re carrying a little computer in their pocket that sends a GPS signal directly to a central database that they can monitor and track.”
So that’s kind of when the gravity of the privacy issue hit me. And then, when I walked into these debates about cash, you have people like Ken Rogoff, who when he was not busy making spreadsheets that justified austerity for a generation, writing books called The Curse of Cash, because he says it facilitates crime and, most importantly for him, it makes it hard for central bankers to maintain the myth that monetary policy and interest rates can manage the entire economy on their own without any fiscal intervention. The classic monetary theory of the Zero Lower Bound is that you can’t drop interest rates below zero, or too much below zero, because everyone will just move their money into cash and store it under their mattress. Now, if we could get rid of cash, he dreams and salivates, then we could have negative interest rates, which would stimulate investment and we’ll never have a situation where we need to rely on fiscal policy, because interest rate management has run out. I’ve written about that in a paper called “Do Negative Interest Rates Live up to the Hype.” I think it’s actually incoherent on its own front, but either way, the central bankers who are desperate to preserve the relevance of themselves are willing to throw anonymous cash under the bus in that process.
And what we’re seeing is the central bankers behind closed doors are having debates about whether we really need privacy or anonymity in cash at all. And they’re mostly concluding that we don’t. This bank of Sweden is one of the few exceptions on that front. But as I said, these are not people who are trained in civil liberties or legal and political science. These are people who’ve got degrees in mostly mathematical modeling. To use their own favorite line, they’re just not technically qualified to comment on the privacy implications of what they’re talking about. And so, I think it’s really important that people who do care about these issues address them. On one hand, Sarah Jeong has talked about the idea of financial transactions as a form of free speech, or a form of political expression, because we’re leftist or materialist enough that we acknowledge that ideas have to have a material form in some way. So with campaign donations and other things, you can’t organize politically without resources. And if all resource transfers require the approval of a central regulator, then it’s gonna be very hard to do things that are potentially quite disruptive to that regulator. One person’s anti-terrorist law is another person’s anti-freedom fighter law.
In addition to political action, you also have things like socially stigmatized activities, like the war on drugs and sex work criminalization. There are fascist things like the Trump administration under Kris Kobach proposing to “fund” Trump’s wall by taxing cross border remittances of immigrant workers from Mexico who are coming up to work on farms and things, and to use control over those cross border payment networks to potentially disrupt what is currently about a $17 billion industry, which would be more than enough to pay for a chunk of the wall, or at least to force Mexico to come to the negotiating table on that. So transactional freedom has a lot of different dimensions of political freedom inherent or intertwined with it. And it’s not the same as being a right wing free speech advocate or saying we should allow corporations to funnel millions of dollars in dark money to political candidates, or to have people create dummy corporations in the Cayman Islands or something. There are going to be crude thinkers who are going to conflate those two different conceptions of monetary privacy as a form of free speech privacy, as a form of political privacy, but in my view, they’re fundamentally different. And it’s important that the left doesn’t abandon that issue to the right wing.
In terms of how I see this working technologically, I’m not an infosec guy, but the way that I think of this as a metaphor is, rather than transacting with other people digitally, rather than having an account where my money flows from my account to your account, what we are creating is a kind of common wallet network layer or protocol, kind of like the TCP/IP protocol, the internet, or the email protocol. Every time you and I want to transact, we take our wallet that has the equivalent of a digital version of a paper note, where, however much our wallet has, just has that number written in the corner of that note. So I’ve got a digital note worth $87.50, and you’ve got one worth $45 or something, and when we want to transact, we go to the wallet network. We say, “I’d like you to rip up my note and rip up this other note, and then give us two other notes back that are worth the same amount overall, but have different relative values.” What I mean by that is, if I have $50, and you have $10, and I want to give you $20 so we both have $30, it would be like we both go up in balaclavas to a robot and we say to that robot, “Destroy this $50 note, destroy this $10 note, and give us back two $30 notes.” The robot doesn’t need to know who we are, doesn’t need to know which one of us is giving the $50 and the $10, and it doesn’t even actually need to know that it’s $50 and $10 going into $30 and $30. Technically speaking, all it needs to know is that $50 plus $10 on one side equals $30 plus $30 on the other.
If you imagine an envelope, and it can weigh the two envelopes in its hand, as long as the two weigh the same amount, it doesn’t actually need to know how much is in there, it just needs to know they weigh exactly the same amount. So technically speaking, what you’re looking for here is a way for monetary transactions to take place between two entities where the transactional network is ensuring there’s no counterfeiting, there’s no double spending, and there’s not someone taking the same $10 bill and spending it in two places at once. But beyond that, the only people who know anything about the transaction are the two people transacting themselves. And that is, to me, the essence of what physical cash allows us to do today.
The government can still control how much cash is out there. You can still see what barcodes are on the notes when you try to deposit them in a bank or use them to pay taxes or something. But if you and I both happen to have some cash, and we want to meet somewhere in a public square, and we’re wearing a balaclava because it hasn’t been criminalized yet in that state, we can go do that and make a transaction like people do in the fish markets where they transact with these long robes and put their hands into each other’s robe so that nobody can see exactly how much transacting is going on, so that nobody else knows the prices people are paying. You could do that kind of anonymized transaction, technically. That’s the political goal that I’m working towards as a matter of privacy and economic freedom.
Maxximilian Seijo: What’s so brilliant about what you’ve done is you’ve taken the previously calcified relations of how people see abstract mediation or governance, like Kafka or even Foucault, where there’s a potential for the medium of itself to be viewed as inherently totalitarian, as inherently abridging freedoms of the actors who participate in it’s shadow. And what you’ve done is you’ve kind of proved and shown how one could design a system that’s inherently abstract, and mediates abstractly, but still preserves the freedom and privacy that formerly could only seem to be happening in supposedly real or immediate interactions.
Rohan Grey: Yeah, and I think the critical thing to note here, and this is why I’m involved in the MMT project more generally, is that this only works if you have an underlying theory of the public nature of money itself, right? We’re talking about cash as an instrument. But that doesn’t work unless there is actually cash circulating in the economy at a reasonable amount that people can have access to. So this is a sort of “microeconomic,” dare I say that word, kind of issue in the sense that it isn’t presupposing, one way or the other, how the money gets injected into the system, whose hands it ends up in, how much starts off in those hands, or what can it be used to purchase things, etc. Those are questions of politics and socialization. This is just pointing out that, at the point at which we have that foundation, transactional privacy is in itself a political and social good. This is something that, again, there are certain leftists who romanticize a sort of pre-industrial or pre-developed complex civilizational view of small towns or hunter gatherer societies where everything is based on kin relationships, or based on personal relationships, as the kind of vision for the future of optimal social interaction.
My view on that, which is probably influenced by being a city kid, is I think that’s quite oppressive in many ways. If you’re a weird, queer, alternative kid in a small town, and everybody knows your shit all the time, that’s extremely unpleasant. And for those kinds of people, the big city, however grinding and crushing it is from a kind of industrial point of view, from an identity point of view, is extremely liberating. That anonymity, that ability to walk outside and blend into a crowd, has a protective aspect to it, both from the local cop or lynch mob, but also from your own family. There’s a reason why in the US people go to college to find themselves. We don’t do that in Australia. And dare I say it, I don’t know how many people find themselves as much in Australia as a result of that. So yeah, I think that’s exactly right. And it’s critical to keep both layers in your head at the same time, even if they may feel like they’re in tension–between this inherently political nature of money and that inherently abstract way that it gets used in certain individualized interactions.
Scott Ferguson: Will you spell out for our listeners, then, the difference between this anonymous e-cash that’s connected to a digital fiat currency, and the vision of the future that is being spelled out by crypto enthusiasts and Bitcoin lovers?
Rohan Grey: Yeah, definitely. This is a critical point. And to be clear, I have a lot of respect for a lot of the motivations of people who are in that space. Not all of them, obviously. But a lot of people are there because they care about privacy, because they’re fundamentally anti-totalitarian and anti-fascist. I think a lot of them are victims of bad economics education, or simply are not yet sufficiently monetarily informed to realize, in many ways, they’re barking up the wrong tree. Because the legal view that I have is that economies and markets are ultimately legally constructed down to the base. You have to own property to sell it, you have to be able to have contracts that can be enforced for transactions to have some sort of enduring stability. And in that sense, the alternative to a government is a mafia that enforces black market transactions, or set of gangs and things, which is just another way of saying government but with slightly less accountability. And so, people who are trying to imagine money without the state, to me that is sort of like trying to imagine law without a form of public authority. It’s a sort of misnomer to me. So, on one hand, some of the technology that comes out of those attempts can be very useful and really adoptable in other public contexts that are valuable.
But my argument would be that it’s actually public cash backed by a democratic macroeconomic vision. That is the best way to preserve individual liberties, rather than trying to sidestep the state entirely on the money layer, even as you’re ultimately going to rely on the state to keep the property titles of the goods that you want to trade. There could be some anarchists and others out there in the Bitcoin space that would love a world where they hire private armies to defend their wallet from a house robber or something. But I think most people who think that we could have a “non-governmental money” as the dominant monetary regime do so without fully thinking about how the government’s still going to be all up in the rest of economic and commercial regulation anyway. And the MMT analysis that looks at money as public money, as starting as a tax credit, and that looks at forms of private money as contractual relationships, those things are inherently also tied to the enforcement of private commercial behavior. If you have a contractual dispute and the judge issues an order of damages, that’s a form of debt, that’s a form almost like an individualized tax. And I’ve said elsewhere, the story of taxes driving the value of public money that MMT talks about, you don’t even need a head tax or a land tax or something. You could even do it with just the threat of legal sanction. You drive down the street and there’s a risk that you hit someone with your car, and if you do so, they’ll sue you and you’ll have to pay them money and whatever the court says you have to pay that person gains a sort of public moneyness in whatever the legal tender is for the settlement of that dispute.
So I don’t think you can have an economy that isn’t grounded in public law. And as a result of that, I don’t think you can have money that serves the functions that the public monetary system does today that isn’t grounded in public law. And because a lot of these private actors don’t see that, they start from the wrong foundation and they end up not getting to where they think they’re going to get, which is why you see things like Matt Gaetz ultimately go under and have all these legal disputes. Or there is the famous case of the decentralized administrative organization that ended up suffering huge amounts of fraud and getting embroiled in legal conflicts and things. Mervyn King had a great line, the former Bank of England governor, that “Banks are global in life and national in death,” which is a way of saying, when the times are going good, cowboys like to think that they don’t need anybody else. And when the shit hits the fan, suddenly, they’re in need of a community again. So I’m not really interested in being a cowboy when it comes to this design stuff. I’m interested in starting from the community framework and moving from there.
William Saas: It seems like there are a lot of potential futures of money running in parallel to each other. I want to ask you, as we close up here, what do you think it’s going to take to realize the kind of transformation you are envisioning for the future of money that you’ve got in mind? Could you tell us a little bit about what the obstacles are as you see them and what we can and should be doing to overcome them? And maybe even what humanities scholars can do to help?
Rohan Grey: Yeah, I guess a global revolution is probably where I’d start.
William Saas: How’s next week for you?
Rohan Grey: I’m sort of being mildly facetious, but not really. I mean, the work that I do with the IT world right now is, in part, a defensive stock guard, in the sense that there’s no way in hell that the Chinese Communist Party, or even the NSA, is going to take the recommendations of the UN as the the end point of their own geopolitical decisions about how surveilled a currency should be. Other countries may: Sweden, and Canada may even. But imperial power certainly isn’t going to be considering that. That said, in the same way we think about the TCP/IP standards, if the technical standards can be kept open, that is to say, if the technical standards allow for a form of anonymous digital cash, and we build this global technical layer that is harmonized across different countries, even if the way that the Chinese Communist Party, or the US government, chooses to manifest that in their own jurisdictions by adding a surveilled layer on top, then as long as that underlying kernel or structure is able to be open there’s at least the possibility of it being undone in the future, or the global infrastructure is not being poisoned by those interests. So I don’t think that the UN is the space in which that political fight is going to be won. I think it might be the space in which we can keep that fight alive. I think this fight is only going to be won when social movements, leftists around the world, and others who care about freedom, totalitarian concerns, economic justice, and distributional and inequity issues, work together to put political pressure and bring attention to these issues.
And they’re going to be hard. It’s not going to be easy. Someone like Brett Scott, a friend of mine who’s written on the war on cash, he’s shouted the alarms as well as any. He is an excellent communicator. But it’s a hard one to bring to people’s attention. So we need to make sure that leftists, as they’re building their programs and vision of the future, that they have this as a layer of concern. That means connecting the economic justice folks with the technological justice folks. It means thinking about empire at the same time as we think about domestic justice, and thinking about technical and legal standards and design at the same time as we think about red blood politics and distributional questions. It also means not being blasé about the scope of this challenge. It’s worth remembering that, in the 1990s, public key encryption software, which is a complicated mathematical way of creating some of these large numbers as a resulted of the multiplication of other prime numbers that’s hard to break cryptographically and forms the basis of a lot of secure communications on the internet, was considered a form of military munitions. And the first person who shared an open source version of public key encryption software was charged with violating the Arms Export Control Act–a guy called Phil Zimmerman.
So I have some sympathy for people who claim that Satoshi Nakamoto is staying offline because he could have really pissed off some governments by starting this whole debate, or by kicking it up a notch. If we’re going to get close to something that’s really meaningfully challenging, in the total surveillance division of both the NSA and the Chinese Communist Party, it’s gonna piss some really powerful people off. We need to be ready for that fight. We need to have all of our allies ready to support us in that fight. I think academics can try to bring attention to this issue and to make sure that they don’t downplay it or consider it as someone else’s problem. This was what my professor at law school really beat into my head. This isn’t someone else’s problem. This isn’t something I have a right to dismiss simply because I’m not technologically sophisticated enough yet to really understand the whole thing. This is a matter of good praxis and good research, as with everything else–and everything else when it comes to understanding and learning our responsibilities as politically informed and engaged people.
Scott Ferguson: But what about culture and aesthetics and the kinds of things that we like to think about in the humanities? How does that figure into these questions you’re raising about the future of digital money?
Rohan Grey: Yeah, great question. One person whose ideas have influenced me a lot in recent years, in addition to MMT and other lawyers, is Viviana Zelizer, a sociologist at Princeton, who wrote a book a few decades back called The Social Meaning of Money. She talked about the way that people experience and use money independent of it’s cold, colorless, and functional economic purpose, and the way that they attach meaning to economic transactions in social ways. Think of the red envelopes of cash people in China send as gifts, or the way that mafioso people don’t like to put their criminal earned money in the collection plate when they go to church on Saturday and things like that, even though it doesn’t really make a difference whether you use the money that somebody gave you for your wedding to buy a gift, or you use that to buy groceries. There’s still something about the act, or the symbolism, of the money that people gave you at that moment. We attach social meanings to economic transactions, I think, because we’re social creatures, and we like to make meaning in otherwise day to day activities, like communal feasts, tea ceremonies, and things. I think this is intrinsic to the history of money.
Alla Semenova and Michael Hudson, MMT related monetary historians, have talked about the origins of money in Greece and near-Eastern civilizations in religious rituals and activities of temples and priests. There’s a ritualistic aspect even to the political nature of money. You can see that today with the key signing ceremonies for various forms of cryptocurrency, like Z-cash, or people who identify on Reddit and Twitter as HODL-ers–people holding crypto assets. And it’s also in the competing cultures that have built up around Bitcoin, Ethereum, and Dogecoin. It’s important to think about the aesthetic experience of using money when trying to change or influence social dynamics and money writ large. Bitcoin, in part, was successful because it’s a cool word. It was a cool concept. It was made cool.
Alexandria Ocasio-Cortez, Sanders, and Corbyn made socialism cool again in a way. In part, because, obviously, there’s underlying structural reasons why people were primed to hear those ideas. But it matters, whether you’re the white-haired grumpy grandfather or the young, cool looking person from New York, in terms of the way that that message gets received. The Ecuadorians, in particular, who were some of the more farsighted policymakers in this space, learned this lesson the hard way. They introduced a government mobile phone-based central bank currency in 2014. But they limited it only to a narrow range of government transactions with a pretty unsexy government-developed mobile phone app. It didn’t really spark the imagination or engender trust. It didn’t really generate a particularly growing usage. And it was ultimately cancelled and is now considered a failure case, tragically.
By contrast, one of the groups the e-currency team that I’ve been consulting with works in the Philippines and is a commercial bank that’s working under one of these regulatory sandboxes with the central bank of the Philippines.They realized early on that they weren’t going to get widespread adoption of this digital currency technology unless they built a whole ecology. So they’ve gotten marketplaces and merchants involved from day one. They had this big kickoff event where they had everybody wearing t-shirts and made it like a whole festival day where people could come and go to a marketplace and buy and sell things. They put these promotional videos out, etc. And it’s a bit hokey, a bit market-y, and kind of gimmicky, but I think that’s ultimately part of the way that we need to think about this. And of course, the private sector guys know this intrinsically, because half of them are snake oil salesmen. And if you’re a snake oil salesman, the one thing you gotta do is make sure your snake oil is better than everyone else’s, or at least looks better than anyone else’s.
So we need to think about the aesthetic experience, as well as just the functional improvements that we’re offering. In addition to that, we need to have new stories and new cultures to fit this new monetary paradigm. If you think about the early cypherpunks, who were working on those anonymous cash ideas, as well as other forms of cryptography, in the 80s and 90s, they had their own movies, their own books, and they had their own chat rooms and things. I think that really gave them a sense of communal identity and a set of cultural references that facilitated their educational and political journeys and served as heuristics in many ways, or at least artifacts that carry significant depth of meaning in ways that just being explicit in communication wouldn’t.
Just to give an example, my partner is part of this Facebook group called NUMTOT, New Urbanist Memes for Transit-Oriented Teens, which started as this joke group but now has about 100,000 members around the world–people who are enthusiastic about public transport. And they have this set of memes, inside jokes, and implicit expectations and understandings around the way that they talk and think about public transportation. And she was already an enthusiast, which is why she joined the group, but I think it’s fair to say that that space and that aesthetic and cultural experience really has further radicalized her and made her feel part of something bigger that wouldn’t have happened simply from logic and just having strong political values. I think the last element here is that we’re in a world driven by attention scarcity.
There’s so many sources of stimulus and information out there. There’s so many competing and serious political challenges and economic and social pathways that we can choose. Part of the challenge is working out where to put our attention. And that requires building a culture that brings in the kind of people that we want and need, educates them, respects their time, respects the rest of their life and fits in with it, rather than asks them to change. I think media and culture, particularly viral and mass media, has the potential to capture the public imagination at this moment and drive public debate and set the terms of the agenda in ways that dry technical statements, or even direct political statements, don’t do. And again, Boots Riley recently, I think, has probably done a better job with Sorry to Bother You in educating a whole segment of the population about labor struggles and union militancy than a thousand Marxist reading group sessions would have done. It’s brilliant art, in that sense.
On the dark side, I think Trump was pretty successful in dominating the national stage and captivating the media in a trainwreck style. He was transfixing in a brutal and violent way, as he acted a real life version of his fake real life persona on The Apprentice. In DC, rather than in a New York studio, but it was this fake life-real life version of a larger than life person that was so effective and enabled him to develop a huge following with very little payment of his own media spending in the campaign. And on the other side of the fence, art reifies existing myths and retrograde understandings about what money can be, and should serve as a site of critique and contestation, which I think you all have been doing excellently and I’m so excited about MMNHD as a project. Obviously, money, and particularly digital money, or maybe less so digital money, is a dryer topic than some other political topics like racism, sexism, or other things.
We should be trying to problematize and deconstruct portrayals of money in popular culture and in artistic artifacts and things in the same way as we deconstruct other problematic representations. There’s some pretty good analysis, for example, of how “The Dark Knight” Trilogy is a fascist trilogy. And there are other more basic examples, like the Bechdel test, which has done a good job bringing to light the subconscious oppression inherent in the way that we tell certain kinds of stories and media. And Max’s analysis of Inglourious Basterds, I think, is a paradigmatic example of how we can be moving that kind of effort ahead. But in order to do that, we definitely need a clear picture of what the political and legal and technical issues are when it comes to money, and what we actually mean and what we want when we talk about economic and monetary freedom and justice in the digital age. So that requires that deeper kind of technological, political, and ideological education as well as a merely artistic and cultural critique.
Scott Ferguson: Rohan Grey, this has been incredibly enlightening. Thank you so much for joining us.
Rohan Grey: Yeah, thanks for having me. It’s a pleasure.
William Saas: Thanks, Rohan.
* Thanks to the Money on the Left production team: Maxximilian Seijo (audio editor), Richard Farrell (transcription), & Meghan Saas (graphic art)